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FirstNet recently selected AT&T as its partner to build, operate and maintain the Nationwide Public Safety Broadband Network (“NPSBN”).  With AT&T leading the charge, network development appears to be on a fast track. In early June, the initial AT&T/FirstNet Radio Access Network (“RAN”) or coverage plans were made available electronically to all 50 states, the District of Columbia and territories of the United States (referred to as the “states” for purposes of this article). After a brief period for review, comment and consultations, the plans will be finalized and the Governor of each state must decide whether to accept the FirstNet plan or to seek an alternative coverage model through the state’s own Request For Proposal (“RFP”) process.

In evaluating its options, the goal of every state should be to obtain the best possible network coverage for its First Responders. The safety of First Responders and the public must be the primary concern in evaluating the AT&T/FirstNet plan. In order to conduct a reasonably thorough examination, the Governors and their teams must have access to the necessary financial, technical and legal information regarding AT&T’s commitments to deliver the NPSBN.

However, the states currently face a major obstacle in conducting their analysis. They do not have access to the underlying contract between AT&T and FirstNet. There have been numerous trade press reports and FirstNet/AT&T presentations about what the AT&T proposed roll-out will entail (e.g. access to the entire AT&T network, public safety usage targets, priority and preemption). However, no one from a state government is privy to the specific terms of the FirstNet/AT&T agreement. As with most agreements the “devil is in the details,” but the states cannot access the details.

There are countless issues involved in the review of state plans that turn on the conditions of the underlying FirstNet/AT&T contract. For example, how much of the statutory requirement for rural coverage can be satisfied through “deployables” as opposed to permanent hardened infrastructure under the terms of the contract? What is the specific long-term commitment to support discounted pricing for public safety use? Is there a mechanism in place to resolve any disputes that may arise between FirstNet and AT&T.

A fundamental question is whether there is an option for AT&T to “opt-out” of the contract with FirstNet if it fails to obtain a certain number of states “opting-in” or for any other reason. Another basic issue pertains to the penalties that AT&T may have to pay if it fails to meet certain levels of public safety use or “adoption” on the network. Without firsthand knowledge of the AT&T/FirstNet agreement, there is no way of knowing with certainty if there are caveats or conditions that could limit such a requirement?  What happens to the spectrum if there is zero public safety adoption in a given area or insufficient adoption on a nationwide basis? These are significant questions to which states are entitled to an answer.

For AT&T and FirstNet to simply address these and other critical questions an on ad hoc basis is not a prudent approach. The only way for a full evaluation of whether the needs and objectives of public safety are being met is for FirstNet and AT&T to disclose the underlying contract to the states so that they can examine the specific terms of the agreement.

As things now stand, a Governor is being asked to accept a vendor to build and operate the public safety network within his or her state – impacting the lives of First Responders and the public – without firsthand knowledge of the terms under which AT&T will provide the service. FirstNet and AT&T should disclose the terms of their contract pursuant to an appropriately drafted non-disclosure agreement so the Governors and their teams will have a complete picture in reviewing the FirstNet/AT&T coverage plans.

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This is the second of two entries on dark fiber arrangements.  Dark fiber is a realistic option for high-bandwidth requirements of businesses, medical and educational institutions, and state and local governments (collectively “enterprises”).  This entry focuses on the two principal types of dark fiber arrangements: indefeasible rights of use (“IRUs”) and leases.  The IRU agreement is different from a telecommunications services agreement, but the dark fiber lease resembles a services agreement.

Under an IRU or a lease, the customer is obtaining a “facility,” not a service such as broadband or VoIP.  The term of an IRU often tracks the useful life of the fiber—at least 20 years.  A dark fiber lease extends up to 5 years, often with renewal options.  Under generally accepted accounting principles, an IRU is typically treated as an asset and a dark fiber lease is treated as an expense.  In addition to different accounting treatment, state property and transactional tax implications may be different.

Indefeasible Rights of Use

Pricing.  IRU customers (“grantees”) typically make two payments to IRU network operators:  the one-time charge for access to and use of the fibers for the duration of the IRU and an annual maintenance charge.  The latter covers “routine” maintenance that is typically scheduled during off-hours and emergency restoration of a fiber cut or other damage to the dark fiber cable or strands. The IRU fee is often paid in two installments:  50% at contract signing and 50% upon acceptance.  The “cost per fiber per mile” is the principal metric for comparing IRU pricing.

In major metro areas, dark fiber network operators (that may also offer telecommunications services) extend their network to customer locations.  This network extension is typically expressed as an agreed-upon, one-time charge that includes the splicing of customer’s fibers at agreed upon demarcation points.

Outside of major metro markets, the network operator may construct all or a portion of a fiber route for a customer (retail services provider, another dark fiber network operator or a technology company).  Network design and construction costs typically are built into the IRU fee.  A newly constructed fiber route invariably includes more fiber strands than a given customer requires.  Network operators often view the initial IRU customer as its “anchor tenant” from which it looks to recover most of the construction costs for a given fiber route.  The total fiber count for a route is a major decision for a network operator; however, other costs of dark fiber network construction (see initial entry) typically exceed significantly the incremental cost of additional fibers along a route.

Business Risks in IRUs.  Customers bear three principal risks in IRU agreements: the fiber network operator’s bankruptcy; loss of underlying rights; and fiber cuts.  The network operator’s bankruptcy poses the most significant risk.  This is due to the term of IRU agreements being 20+ years, the IRU fee typically being paid in full during the initial year, and the relative modest capitalization of dark fiber network providers (as compared to the major telecom and cable service providers).

Continue Reading Enterprise Customers and Dark Fiber: An Important Connection (Part 2)

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FirstNet was born more than five years ago with the passage of the Middle Class Tax Relief And Job Creation Act of 2012 (“Act”). As we wait for the conclusion of a court challenge by Rivada Mercury to the federal government’s procedures in selecting FirstNet’s partner to build, operate and maintain the nationwide public safety broadband network, one wonders if there is a better way forward. Does FirstNet really need the Federal Acquisition Regulation (“FAR”) procedures to select its partner?

FAR contains the uniform policies and procedures for acquisitions by agencies and departments of the federal government. For many, it is a lengthy, complex and bewildering maze of requirements. For a single-purpose, long-term service provider relationship, the question is whether FirstNet would be better off without the FAR? The FirstNet enabling legislation simply requires FirstNet to issue Request for Proposals (“RFP”) for selection of a vendor to construct and operate the network that are “open, transparent and competitive.” There is nothing in the legislation that requires FirstNet to use FAR procedures to select a vendor.

FirstNet is an “independent authority” within the National Telecommunications and Information Administration (“NTIA”) with an urgent public safety and national security mission. Despite not being an “executive agency” explicitly subject to the FAR, FirstNet decided early on to subject itself to the rigorous hurdles required by FAR. FirstNet “assumed” application of the FAR because it  was “not expressly excluded from application of the Federal Acquisition Regulation.”

Under FAR, FirstNet had expected that a winning bidder for building out the network would be selected by November 1, 2016. However, as often happens in the FAR process, a court challenge was instituted by a disappointed bidder. The dispute could end soon and FirstNet will be able to go forward with its selected winner – AT&T by all public accounts. But what happens if the Court finds that FirstNet did not follow FAR requirements in the selection process? What happens if there are further court appeals leading to endless delay? Delay, delay and more delay is not in the best interest of the nation as FirstNet waits to fulfill its statutory mandate.

At what point should FirstNet even consider turning away from the FAR? FirstNet has gone so far down this road that it may be difficult at this time to forge a better path to a speedy and fruitful result. Nevertheless, FirstNet is not obligated to follow FAR procedures and it is free to craft its own guidelines for selection of a partner subject only to the “open, transparent and competitive” standard of the Act. There is nothing in the legislation that prevents FirstNet’s procedural guidelines from being simple, transparent and straightforward.

When it was first created, many had hoped FirstNet would act like a quasi-private entity with the ability to move swiftly, unburdened by bureaucratic quicksand. Unfortunately, as those who have followed FirstNet’s early history are well aware, that has not been the case. Perhaps out of necessity FirstNet will need to find a new way to “do business.” Just perhaps, the time is soon coming when FirstNet will find it best to sit at the negotiating table much like a private entity and negotiate a deal that is in the best interest of the country, without the weight of the FAR on its shoulders. While at the outset, FAR may have been considered a “safe” way forward, as demonstrated by the pending court challenge it is not necessarily the “best way” for FirstNet.

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This is the first of two entries on dark fiber arrangements for the dedicated, high-bandwidth requirements of businesses, medical and educational institutions, and state and local governments (collectively “enterprises”).

Enterprises should consider dark fiber arrangements for local and regional high capacity requirements. High-bandwidth, dedicated services (Gig-Ethernet and higher) within metropolitan areas are relatively expensive on a cost-per-mbps basis; special access service rates are not competitive and the major carriers are not aggressively competing for dedicated high capacity services in regional markets.

The second entry focuses on the two principal agreements under which enterprises may acquire dark fiber: indefeasible rights of use (“IRUs”) and leases.

Dark Fiber—In Brief

Dark fiber is a facility, comprised of glass fibers, placed in a loose tube with filler and strength members; multiple tubes may be placed within a sheath (collectively “fiber optic cable.”)  The unlit glass fibers are universally referred to as “the dark fibers.” The “fiber counts” in a fiber optic cable vary. Fiber optic cable may be installed in underground conduit (“underground”) or extended along utility poles and other aboveground infrastructure (“aerial”). Most dark fiber arrangements are between dark fiber providers and telecommunications carriers.

In dark fiber arrangements, the customer (carrier or end-user) is responsible for “lighting the fiber”—installing and maintaining the electronics, principally the transmitters to convert electrical signals into light and the receivers that convert the light back into electrical signals for processing and conveying communications. A dark fiber provider terminates its fiber optic cable in connectors or performs fiber splices between their dark fibers and its customer’s cabling or fiber at mutually agreed upon demarcation points (patch panels that may contain connectors or splice boxes or both).

Dark fiber customers typically do not physically access the dark fibers, but often require providers to perform tests to confirm the glass fibers meet end-to-end connectivity measures and that all splices connecting network fiber to the customers’ cables meet industry standards at delivery (acceptance) and that these measures and standards are maintained for the duration of the agreed upon term.

The Merits of Dark Fiber Connectivity

                  Dark Fiber is a Durable Asset. Fiber optic cables have useful lives of 20–30 years, or more.  Fiber optic technology (the cable and the electronics) is a building block of telecommunications networks throughout the world; wireless and wireline. Annual maintenance costs are modest, though fiber cuts do occur and permanent restoration is a significant undertaking that dark fiber providers price into their charges.

                  Derivable Bandwidth Will Increase Over Time. The electronics that “light” the dark fibers are part of a very large, well-funded technology ecosystem. Over the useful life of a fiber optic cable, the derivable bandwidth/capacity should increase substantially due to advances in the underlying technologies embedded in the electronics. This is why one major wireless carrier opts for dark fiber connectivity between its small cell sites and network.

                 Fiber Deployments Are Capital-Intensive. The “sunk costs” of fiber networks are substantial: right-of-way and easement acquisition, construction and other land use permitting, the installation of the fiber optic cable—underground or aerial, the fiber optic cable, and the splicing and testing of the fiber. Splicing is necessary throughout a fiber network because cable lengths are limited by amount of cable that can be rolled around spools for transport and ready deployment. Regenerators must also be installed in fiber networks as the signal must be regenerated to reach distant endpoints.

For these reasons, enterprise customers and technology companies rarely construct fiber networks extending beyond the contiguous real estate of their facilities. The major exceptions are electric utilities that have deployed fiber optic networks for years to support their operations. Utility easements and rights-of-way typically accommodate dark fiber installed for a utility’s internal telecommunications requirements.

                 Major Telecommunications Carriers Typically Do Not Offer Dark Fiber Arrangements. The three largest domestic wireline carriers: AT&T, Verizon and CenturyLink do not typically offer, if at all, dark fiber options to end user customers. It is doubtful this practice will change significantly despite Verizon’s acquisition of XO Communications and CenturyLink’s proposed acquisition of Level 3 Communications. The three largest cable operators—Comcast, Charter-Time Warner and Cox may prove more flexible.

Zayo is probably the largest, independent (as of the date of posting for this entry at least) dark fiber provider (that also offers services) in the United States. There are other metro-area fiber networks in the larger metropolitan areas. Service providers offering dark fiber arrangements exist in less densely populated areas as well, particularly along the Nation’s major North-South and East-West fiber routes.

                 Total Cost of Ownership. The full cost of dark fiber arrangements includes the cost of the electronics, the lease/use charges for the dark fibers, the dark provider’s one-time costs particularly extending facilities to a customer’s locations, and the customer’s costs in managing the electronics and monitoring network connectivity. On the other hand, the USF charges are not imposed on dark fiber transactions and sales, use and gross receipts taxes applicable to “telecommunications services” may not apply though other state taxes may apply (to be confirmed by state transaction tax counsel).

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On January 30, President Trump signed an Executive Order on Reducing Regulation and Controlling Regulatory Costs. The Executive Order sets out a number of related concepts focused limiting Federal regulations, including a “Regulatory Cap” that is implemented through three inter-related provisions

  1. “Section 2(a): Unless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.
  2. Section 2(b):. .  .  [T]he heads of all agencies are directed that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget (Director).
  3. Section 2(c):. .  . [A]ny new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.

During my years at the Federal Communication Commission, I worked on implementation of a one-for-one deregulation directive by the FCC Chairman that specified a new regulation could not be added unless an existing regulation was deleted. That initiative did not call for a comparison of costs of the proposed regulations and the proposed deletions; sometimes the outcome was the addition of a substantive and potentially burdensome new regulation “offset” by the elimination of an outdated or largely irrelevant regulation that no longer had significant impact and did not provide any real cost savings. Provision 2(c) of the Executive Order appears to call for a cost- based approach to deregulation.

An important legal distinction is that the FCC is not bound by the Executive Order because the FCC is an independent regulatory agency, rather than a part of the Executive Branch of the Federal Government. However, there is good reason to believe that the FCC may choose to emulate the Executive Order based on previous statements made by then minority Republican Commissioners Pai and O’Reilly in response to the adoption of new FCC rules, regulations and policies they viewed as either unwarranted or unduly burdensome.

In a December 2016 speech, prior to being named FCC Chairman, Commissioner Pai offered these comments: “In the months to come, we also need to remove outdated and unnecessary regulations.  As anyone who has attempted to take a quick spin through Part 47 of the Code of Federal Regulations could tell you, the regulatory underbrush at the FCC is thick.  We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation.  Free State and others have already identified many that should go.  And one way the FCC can do this is through the biennial review, which we kicked off in early November.  Under section 11, Congress specifically directed the FCC to repeal unnecessary regulations.  We should follow that command.”

The biennial review referred to in then Commissioner Pai’s speech is underway in an FCC docket. The Public Notice issued in late December has a 57-page Appendix listing the rules adopted by the FCC 10 years ago and now due for review. Comments in that proceeding are due on or before May 4, 2017.  As part of the biennial review, Chairman Pai could direct that the FCC follow a substantially similar approach to the Executive Order.

The change in attitude toward regulation at the FCC by the new Chairman and majority makes this the ideal time for an entity to compile its wish list of FCC regulations to eliminate as unnecessary or streamline to make less burdensome or more cost effective. The alignment of the Executive Order, Chairman Pai’s deregulatory mindset, and the biennial review are an opportunity that should be seized and quickly.

The attorneys in the Telecommunications Practice Group at Keller and Heckman would welcome the opportunity to review your ideas on a courtesy basis and discuss how we can provide our assistance in presenting your proposals to the Commission.

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The nation watched President Trump take the oath of office last Friday.  On the same day, but to considerably less fanfare, it was widely reported that President Trump would appoint Commissioner Ajit Pai as Chairman of the FCC.  It became official on January 23, 2017.

Chairman Pai is joined by current Commissioners O’Reilly (a Republican) and Clyburn (a Democrat).  The Republican majority should make it easier for Chairman Pai to quickly act on his priorities.

What are his priorities?  To get a sense, we examine then-Commissioner Pai’s public statements in several high-profile – and sometimes contentious – FCC proceedings. Continue Reading FCC Priorities Under Republican Leadership

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There are familiar maxims in many sports, such as “Live by the 3-point shot, die by the 3-point shot” in basketball. The message being that high-risk tactics that bring temporary success often reverse and lead to ultimate defeat.

In recent years under Chairman Tom Wheeler, the FCC has decided many major decisions along bitterly divided 3-2 party line votes among the five Commissioners. The two Republican Commissioners have often accused the three Democratic Commissioners of ignoring the record before the FCC, ignoring past FCC precedent or the Communications Act, and refusing to consider other points of view or to reaching compromises across party lines.  As a general rule, the Republican Commissioners preferred approaches and policies grounded in technology or competition, rather than additional regulation.

This recent history is very unusual for the FCC. In prior administrations, most telecommunications policy-making at the FCC has been largely non-partisan. Policy differences between Democratic and Republican Commissioners were usually more differences of emphasis or priorities rather than on fundamentals, with both parties generally supporting a significant amount of deregulation and changes to introduce and support new technologies and services.

Historically, there has been a high degree of comity among the FCC Commissioners across party lines most of the time. Typically, negotiations between and among Commissioners’ offices tried to eliminate or reduce as much as possible strong disagreements on decisions.  There were exceptions of course, but they were exceptions not the normal course of business month in and month out.

The current FCC has operated very differently. At most of its monthly public meetings, major FCC decisions have been adopted by party-line 3-2 votes.  The divisions have been marked by strong dissents that attack both the substance and process of the FCC decision-making.  Moreover, there has been the same kind of unyielding disagreement between the majority Democratic Commissioners and the Republican Chairs of Congressional Committees and Subcommittees responsible for telecommunications in the House and Senate.

During calendar year 2015, these FCC decisions at public meetings are examples of the divided process:

  • January: 2015 Broadband Progress Report in which the FCC adopted 25 Mbps downstream and 3 Mbps upstream as the new benchmark for fixed broadband service.
  • February: Open Internet Order in which the FCC adopted a new regulatory framework for broadband and reclassified fixed and mobile broadband Internet Access Service as a telecommunications service, subject to Title II of the Communications Act. Though affirmed by the D.C. Circuit, a petition for rehearing en banc remains pending.
  • February: Declaratory Order pre-empting North Carolina and Tennessee laws limiting the service areas of municipal broadband providers to their municipal boundaries. The FCC decision was reversed on appeal.
  • June: Changes to the Lifeline Program.
  • July: Designated Entity Rules for Spectrum Auctions.
  • August: IP Technology Transition and Copper Loop Retirements.
  • August: Incentive Auction Bidding Procedures.
  • October: Inmate Calling Rates. The FCC was reversed on appeal but the matter is still pending.

This trend continued into 2016 as the FCC adopted its Broadband Consumer Privacy Rules. However, it appears that the current FCC leadership is now heeding the request of House and Senate Republicans to defer action on potentially controversial items, including several that had been placed on the agenda for the Commission’s November Open Meeting, one of which was special access service rate reform.

Because of the magnitude of the policy disagreements at the FCC between Democratic and Republican Commissioners, many FCC observers believe that a number of these recent decisions will be scaled-back or reversed once Republican Commissioners acquire a majority or as the Republican majorities in the House and Senate focus on telecommunications policy including a possible re-write of the Communications Act of 1934, as amended.

Soon after President-Elect Trump is sworn in, one of the two current Republican Commissioners will be named the Acting FCC Chairman. While this will not immediately change the majority-minority status of Democrats and Republicans at the FCC, it would be no surprise if then ex-Chairman Wheeler resigns rather than continue on as a Commissioner.  Democratic Commissioner Rosenworcel’s term expires as the current Congress ends, unless the Senate confirms her reappointment to another term.  These potential transitions in FCC leadership raise the possibility of a 2-1 Republican majority at the FCC until vacancies are filled.

Moreover, even if there is still a Democratic majority on the FCC, the Acting FCC Chairman will have authority to direct the agenda and the staff of the FCC. Some policies may change immediately under a Republican Acting Chairman, such as the very large forfeitures that have been imposed by the Enforcement Bureau during the past two years.  The Republican Commissioners argued that many of these forfeiture decisions lacked a sound basis or objective, but were, in fact, unauthorized policy-setting by the staff.

The most important question is whether there is reasonable hope that a less partisan decision-making process will return after what may well be a second exceptional period of divided decision-making under a new Republican majority at the FCC. The obvious value of a consensus-driven approach is that the telecommunications industry and public could rely on FCC decisions having long-term viability and not being subject to reversal whenever a new President takes up residency at the White House.

The serious risk is that after potentially two significant periods of highly politicized decision-making at the FCC, highly partisan decision-making becomes the new normal. In that case, the telecommunications industry will find itself on a policy roller coaster ride for many years to come and that is unlikely to sustainably advance the interests of either the industry or the public.

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This entry highlights the consequences of the FCC’s IP Transition orders for business customers and competitive carriers in terms of costs, changes in customer premises equipment (CPE), operational impacts and, for competitive carriers, interconnection agreements.

As noted in our 1st Entry in this two-part series, each ILEC sets its own plans and time lines for implementing its IP transition. There are no FCC mandated deadlines or due dates for initiating or completing the IP transition. Subject to the FCC’s rules and policies, the ILECs may implement their IP transitions locally, state-wide or throughout all of their service territories as they see fit. The same is true for copper loop retirements.

Business Customers

For business customers with locations having relatively modest voice and data requirements, such as many retail outlets, commercial and MDU property managers, and small government offices, the transition to IP voice services is the priority concern. For higher traffic locations, including major enterprise locations, call centers, hospitals, large government facilities and data centers, the transition to IP special access services may prove the most challenging.

Wireline Voice Services

1. The IP transition may disrupt (likely accelerate) enterprise planning for deploying IP-based CPE, including IP-PBXs, to implement VoIP and SIP trunking.

2. VoIP and SIP trunking customers must manage their CPE and business processes so that their end users can complete wireline 9 1 1 calls consistent with FCC rules and comply with state and, possibly, Federal versions of “Kari’s law” that require emergency calls be completed with three-digit “9 1 1” dialing and not “9 + 9 1 1” dialing. Compliance with local wireline “emergency phone service” regulations must also be addressed.

3. Wireline voice service rates should become more competitive for all business customers as VoIP services are not subject to federal or state legacy rate or tariff regulation and as the ILECs roll-out cloud-based VoIP service offerings.

a. Points of origination and termination for wireline voice pricing will be displaced by “all-distance” pricing comparable to mobile voice pricing, encompassing  local, intrastate, interstate and, increasingly, international voice communications.

b. Thus, business customers should become familiar with the pricing for VoIP services and SIP trunking in order to compare the rates for these services to the familiar pricing for circuit-switched voice services and PBX trunks

Special Access Services

1. The vast majority of end users acquire special access services (DS-1, DS-3, OCn and Ethernet equivalents) bundled with interexchange voice or data services provided by wide-area network (WAN) service providers (a/k/a interexchange carriers.)

2. The “reasonably comparable” standard of rates, terms and conditions for replacement Ethernet services adopted in the 2015 IP Transition Report and Order provides a reasonable measure of price stability. And, based on the latest Special Access Further Notice of Proposed Rulemaking, this standard should remain in place throughout the IP transition.

3. Except for very low latency applications, Ethernet special access service should be a functional equivalent to TDM dedicated access circuits.

4. The mechanics of converting to Ethernet service could prove challenging. Copper loops may support lower speed Ethernet services, but fiber or hybrid fiber-coax may be required for higher capacity services.

a. One point of reference as to what users might expect is the transition from one WAN service provider to another. This is probably the best case scenario.

b. The IP transition will be different from WAN service provider transitions (from incumbent to successor WAN service providers) in which customers and services providers share the objective of converting customer locations to the successor provider’s network in a timely manner. In the IP transition, the process will be driven by individual ILECs each transitioning to Ethernet service per its plans and timetable.

c. In theory, customer locations served by an ILEC affiliate of the WAN service provider should have a smoother transition, assuming closer coordination between the two affiliates.

Competitive Service Providers 

In many respects, the FCC’s IP Transition orders limit the ILECs’ discretion to do as they please. At this juncture, the rules governing the IP transition are set and the competitive service providers have limited opportunity to protest or delay the process—assuming the ILECs follow the rules. Competitive service providers must be prepared to act as the ILECs implement the transition to IP-based services.

Wireline Voice Services

1.  CLECs relying on ILEC copper loops and TDM-based wholesale platform services face the challenge of migrating to different facilities and technologies to operate in all-IP environments. The ILECs may transfer/sell their abandoned copper loops to requesting CLECs, but are not required to do so.

2. The status of local service interconnection remains an open question. CLECs will benefit from the FCC’s resolution of whether IP VoIP interconnection arrangements between ILECs and CLECs are voluntary commercial agreements or interconnection agreements subject to the Section 251/252 framework.

Special Access Services

1. WAN service providers (aka “interexchange carriers”) have either implemented or currently operate IP voice and data networks. Customer transitions to these interexchange IP services are ongoing. The IP transition poses the challenge of coordinating deployments of IP special access services to customer locations based on the ILECs’ timetables and schedules.

2. WAN service providers will benefit from the FCC’s requirement that ILECs’ Ethernet special access services be made available under rates, terms and conditions that are “reasonably comparable” to the corresponding ILEC TDM services.

The “reasonably comparable standard” likely will be retained as the FCC adopts its decision in the special access proceeding.

3. Competitive Access Providers that have deployed facilities in metro areas may offer more compelling IP special access services as compared to those of the ILECs.

The ongoing challenge/question is whether competitive access providers do or will extend their networks to an end-user’s location.

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The State of New Hampshire has taken a bold step in its dealings with FirstNet that could serve as a model. Will other states (and territories) follow the Granite State’s lead?

In a few short months, FirstNet is expected to select a vendor to build, operate and maintain the Nationwide Public Safety Broadband Network (“NPSBN”). After some consultation, FirstNet and its newly selected partner will present a plan to each state for construction of a radio access network (“RAN”) consisting of towers, backhaul and other infrastructure within that state. Each state has the option of accepting the FirstNet plan or developing its own RAN plan as an alternative.

For any state that may want to pursue an alternative plan, there are procedural hurdles and regulatory approvals that must be obtained, but the principal challenge may well be timing. From the date the FirstNet plan is presented to a state, the Governor will have 90 days to decide whether to accept this plan or opt-out and pursue an alternate plan that offers a better approach for meeting the state’s public safety coverage requirements.

If a state decides to opt-out, it must notify the FCC, NTIA and FirstNet within this 90 day window. States that fail to provide notice of an opt-out decision will lose that opportunity. Making an opt-out decision without any real alternative to the FirstNet plan in front of a state’s Governor would be difficult to say the least.

In the event a state files an opt-out notice, the state must develop and complete within 180 days requests for proposals (“RFP”) for the construction, maintenance and operation of the RAN for the State. Completing an RFP and developing an alternative plan within 270 days (starting from delivery of FirstNet’s plan) is a significant challenge.

However, the State of New Hampshire may have found a formula for addressing this timing challenge. Rather than trying to develop a plan under an almost impossible “shot clock,” New Hampshire took the pro-active approach, issuing an RFP in December 2015 and recently selecting a vendor –Rivada Networks–for the purpose of creating an alternative plan to be compared to the FirstNet plan.

New Hampshire has not decided to opt-out. However, with a vendor in place to evaluate the FirstNet plan and develop an alternative proposal before the Governor’s decision, New Hampshire has positioned itself to make a meaningful choice. The question now is how many other states (or territories) will follow this path?

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For several years, the major incumbent local exchange carriers (ILECs) have been heralding the benefits of transitioning their networks to IP technology. The FCC has supported this transition. Agreeing that “less is often more” and reviewing related decisions in one entry may be helpful, this entry highlights the FCC’s recent decisions on policies and procedures for implementing the IP transition.

This is the 1st entry in a two part-series. Implications for end users and competitive carriers will be the focus of the 2nd entry.

The rules on copper loop retirements and the IP transition for retail voice services apply to price cap and rural rate-of-return ILECs with minor distinctions. The rules on wholesale services pertain principally to the price cap ILECs as these carriers offer the vast preponderance of special access and wholesale platform voice services. The FCC deserves a “tip-of-the-hat” on these decisions; the agency evaluated the merits of numerous positions and made reasonable decisions on countless issues.

An important caveat is that each ILEC sets its own plans and time lines for implementing its IP transition. There are no deadlines or due dates. Subject to the rules adopted in these FCC decisions, the ILECs may implement their IP transitions locally, state-wide or throughout all of their service territories. The same is true for copper loop retirements.

The procedural paths that include notices to customers or competitors vary.

Copper Loop Retirements. The FCC updated copper retirement rules that had been in effect for years.  Importantly, the copper replacements are subject to notice obligations, but not FCC approval. Two major changes are (1) the agency declined to allow oppositions or objections to notices of copper loop replacements, but imposed a “good faith communication requirement” on ILECs to provide additional information so that interconnecting services providers can implement changes in their networks without service disruptions, and (2) increased the notice period to just over 180 days.

Each ILEC is required to provide notice of a copper loop retirement to the Commission on the same date it provides notice “to each information service provider and telecommunications service provider that directly interconnects” to the ILEC’s network as well as changes in prices, terms or conditions associated with a copper loop retirement. The Commission then issues a Public Notice announcing the filing, effectively starting the 180-day period. Within 90 days of the date of this Public Notice, the ILEC must submit a certification that attests to timely notifications and other matters.

In addition, an ILEC must provide 180 days written notice (via mail or e-mail if authorized by the customer) of copper retirements being replaced by FTTP services to business customers and schools and libraries, and 90 days to residential customers. The FCC declined to require the ILECs to make available retired copper loops to CLECs, but encouraged ILECs to negotiate the sale of abandoned copper loops.

The rules are now in effect. Among others, Verizon and CenturyLink, are implementing copper loop retirements, identifying retirement projects by reference to affected wire centers.

Wholesale Services. In order to discontinue wholesale services (special access services and wholesale voice service platforms), each ILEC must file applications to discontinue service under Section 214 of the Communications Act. In addition, the FCC denied USTelecom’s Petition for Reconsideration of the declaratory ruling in which the FCC concluded that the term “service” in section 214(a) is defined functionally and not solely by service definitions in ILEC tariffs.

Broadly speaking, ILECs must establish that replacement IP wholesale services are “reasonably comparable” to the existing TDM services in terms of capacity, price and quality of service. For example, 100 Mbps Ethernet access service priced at market rates is not a reasonably comparable replacement for DS-1 special access service; substantially more bandwidth priced at a noticeably higher rate is not “reasonably comparable.” Importantly, “price-per-Mbps” and the net cost of the IP replacement special access service cannot be significantly higher than the pricing for the DS-1 or DS-3 service being replaced.

As a Section 214 discontinuance application is filed with the FCC, a copy must be served on the ILEC’s customers—CLECs, IXCs, wireless carriers and end users that acquire special access services directly from ILECs—as well as government offices specified under Section 214. Assuming the ILEC’s application meets the “reasonably comparable” standard, the FCC will “automatically grant” an ILEC’s Section 214 discontinuance application thirty (30) days after the application is placed on Public Notice.

This “reasonably comparable” standard is an interim rule, subject to the outcome of the FCC’s ongoing investigation into the price cap ILECs’ rates, terms and conditions for special access services—particularly DS-1 and DS-3 services. A final decision in the FCC’s multi-year special access investigation is expected this fall.

Rather than move forward under rules that will expire as the IP transition concludes, USTelecom filed a petition for review with the D.C. Circuit. Pet. for Review, United States Telecom Assoc. v. FCC, et al., Case No. 15-1414 (D.C. Cir., Nov. 12, 2015). USTelecom maintains that Section 214 does not require ILECs discontinuing wholesale TDM services to consider the impact on competitive carriers’ customers, the FCC’s Declaratory Ruling is inconsistent with Section 214 and applicable precedent, and the “reasonably comparable standard” should not apply pending the outcome of the FCC’s special access investigation.

Retail Voice Services. The FCC’s decision to facilitate the IP transition for retail wireline voice services also establishes a series of rules for “automatic grants” of ILEC Section 214 applications to discontinue TDM retail voice services. If the requisite showings are made, the ILECs may begin the transition to IP services 31 days after the applications are filed. In addition to customer notices (via mail or e-mail as authorized by a customer), the ILECs must engage in community outreach activities on the IP transition.

In support of this flexible approach, the FCC determined that the market interstate switched access services (which is tied to TDM technology) is competitive, noting the migration to wireless voice services and VoIP services have largely eroded the relevance of ILECs’ switched access services.

In addressing retail customers’ concerns, the FCC requires that replacement IP wireline voice services must (i) have substantially similar network performance metrics (latency of 100 ms or less for 95% of all peak period round trip measurements and data loss not worse than 1% for packet-based networks); (ii) maintain service availability at 99.99%; and (iii) cover the same geographic footprint as the discontinued TDM service. These criteria are intended to be technology neutral; thus, a fixed wireless replacement that meets these criteria is an acceptable replacement technology. Each ILEC must certify that each IP service “platform” meets these requirements; in order to do so, the ILEC must follow the FCC test procedures, except ILECs having 100,000 or fewer subscribers may use other test procedures.

The cost of the replacement IP service cannot be substantially more than the TDM voice service being discontinued. The IP replacement services must support critical applications such as 9 1 1 and access for persons with physical disabilities and must be interoperable with widely adopted low-speed modem devices, such as fax machines and point of sale terminals, through 2025.